State's recovery accelerates

Wednesday

Oct 9, 2013 at 12:01 AMOct 9, 2013 at 2:05 AM

Oregon's economy began to pick up at the end of last year, and it has managed to continue to accelerate despite the contraction in government spending and increase in taxes, according to University of Oregon economist Tim Duy, who compiles a monthly Index of Economic Indicators.

The (Eugene) Register-Guard

Oregon's economy began to pick up at the end of last year, and it has managed to continue to accelerate despite the contraction in government spending and increase in taxes, according to University of Oregon economist Tim Duy, who compiles a monthly Index of Economic Indicators.

"That's generally good news that we have weathered the initial stages of tighter fiscal policy pretty well," he said Monday, commenting on the index figures for August, which were released Monday. Fiscal policy is the use of government spending and taxation to influence the economy.

There were several bright spots in the index, including a strong manufacturing sector in Oregon so far this year,.

"Average hours per production worker in Oregon are holding near cycle highs," Duy said. "That indicates that factories are running at capacity and could signal more hires in the future."

The UO index gives an outlook for the state's economy in the next three to six months. It tracks eight economic indicators, including initial unemployment claims, residential building permits and orders for capital goods.

The index was 96.4 in August, the same as it had been in July. The index uses 1997 as the base year of 100. In general, the higher the index, the better the economic outlook.

The latest index is for August, and doesn't reflect the recent shutdown of the federal government or the uncertainty about whether Congress will raise the government debt ceiling in time to avert a default.

If the government shutdown is short-lived the economic impacts would be minimal, Duy said. But if it drags on, it will weigh down consumption until federal workers are paid, he said.

Longer term, "as it becomes increasingly evident that the government is in gridlock, household and business confidence may fall and restrain spending further," he said.

The worst-case scenario, Duy said, is that the U.S. Treasury has trouble making payments on its debt. The impact of even a minor or technical debt default is unknown, he said.

U.S. Treasury debt is "generally considered some of the safest assets in the world and the financial markets could react poorly to a debt default, including another crisis if the bedrock safe asset is no longer safe," Duy said.

As for the likelihood of the worst-case scenario: "Three months ago I would have said that can't possibly happen," he said. "Now I have no idea."

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